The telecommunications company Tigo in Colombia has been saved in extremis after its parent company, Empresas Públicas de Medellin (EPM), approved providing funds to rescue its subsidiary and ensure its financial viability. EPM owns 50% of Tigo’s shares, with the other half belonging to the European company Millicom International Cellular.
EPM confirmed the capitalization of Tigo with a value of 300 billion Colombian pesos, which will be invested in Tigo in October and December of this year.
Capitalization Agreement with Millicom
EPM commits to capitalize Tigo based on four premises agreed upon with Millicom, the co-owner of Tigo.
The first premise is that the capitalization must be carried out at the market value of the shares. The second point is that the return of the funds will be through the repurchase of shares by UNE, and if this is not achieved, EPM will exercise the PUT Option (mandatory purchase by Millicom) at an agreed-upon share value.
Additionally, EPM managed to extend the clause protecting public assets until December 2026. Finally, the parties agreed that the payment would be made in two installments: 50% in October and the remaining half in December.
The first payment is immediate, during this same month, providing a lifeline to Tigo’s struggling finances, which were at serious risk of financial viability starting on October 11.
15 Million Users in Colombia
Tigo has a total of 15 million customers, including mobile and fixed-line telephony, in Colombia. After weeks of uncertainty, as the service was not guaranteed in case of the company’s economic collapse, the last-minute agreement between the two owners of Tigo ensures the continuity of telephone service for these subscribers.
“With this decision, the EPM Board of Directors reaffirms its commitment to exploring alternatives to ensure the viability of Tigo-UNE and the well-being of all its stakeholders,” EPM announced on its social media.
Change of Opinion by the Mayor’s Office of Medellin
The matter appeared to be unsolvable as EPM had announced that it was not willing to provide any resources for the capitalization of Tigo. This was stated by the now former mayor of Medellin, Daniel Quintero, who recently resigned to participate in the political campaign of his political protege, Juan Carlos Upegui.
“After verifying the current conditions of Tigo and the administration carried out by Millicom since 2014, the EPM Board of Directors has decided not to provide 300 billion pesos in public resources requested by them for capitalization,” Quintero wrote on his social media.
Quintero’s departure from the mayor’s office seems to have unlocked the solution. It’s worth noting that EPM is a publicly-owned company, thus controlled by the city administration.